Infinera Corporation Announces Preliminary Third Quarter 2023 Financial Results
Nov 9, 2023
San Jose, Calif. – Infinera Corporation (NASDAQ: INFN) (or “Company”) today released preliminary financial results for its third quarter ended September 30, 2023.
For the third quarter,
- Preliminary revenue is expected to be $378 million to $392 million, ahead of the midpoint of the Company’s prior outlook of $361 million to $391 million.
- The resulting preliminary GAAP gross margin is expected to be 38.4% to 40.7%, ahead of the midpoint of the Company’s prior outlook of 36% to 39%.
- The resulting preliminary GAAP operating margin is expected to be (1.4%) to 2.2%, ahead of the Company’s prior outlook of (8%) to (3%).
- The resulting preliminary GAAP EPS is expected to be a loss of ($0.07) to ($0.02), ahead of the Company’s prior outlook of a loss of ($0.17) to ($0.09).
- Preliminary non-GAAP gross margin is expected to be 40.0% to 42.2%, ahead of the midpoint of the Company’s prior outlook of 37.5% to 40.5%, and the preliminary non-GAAP operating margin is expected to be 4.6% to 8.0%, ahead of the Company’s prior outlook of (1%) to 4%.
- Preliminary non-GAAP net income (loss) per diluted share is expected to be $0.03 to $0.08, ahead of the Company’s prior outlook of ($0.06) to $0.02.
- Preliminary cash and cash equivalents, including restricted cash, was $127 million.
Infinera CEO David Heard said, “The third quarter was another solid quarter for us, with all key preliminary financial metrics – revenue, gross margin, operating margin, and EPS, expected to be ahead of the midpoint of our outlook range. Bookings were strong in the quarter with a book-to-bill ratio above 1, based on our preliminary revenue range. Furthermore, through the first three quarters of 2023, we expect to report that we have grown revenue, expanded gross margin, and increased operating margin, compared to the same period last year.”
“Traction across our portfolio remained strong in the quarter. We secured new design wins with major telecom service providers and hyperscale customers for our Systems group and received additional orders for our Subsystems group. We remain confident in our strategy, laser focused on execution and committed to driving meaningful earnings per share expansion in the future,” continued Mr. Heard.
Preliminary Financial Outlook
Infinera’s preliminary outlook for the quarter ending December 30, 2023, is as follows:
- Revenue is expected to be $421 million to $451 million.
- GAAP gross margin is expected to be 37.3% to 40.4%. Non-GAAP gross margin is expected to be 38.0% to 41.0%.
- GAAP operating expenses are expected to be $155.3 million to $159.3 million. Non-GAAP operating expenses are expected to be $138.0 million to 142.0 million.
- GAAP operating margin is expected to be 0.7% to 5.0%. Non-GAAP operating margin is expected to be 5.5% to 9.5%.
- GAAP net (loss) or income per diluted share is expected to be $(0.04) to $0.04. Non-GAAP net income per diluted share is expected to be $0.05 to $0.13.
This preliminary outlook reflects the expected impact of the timing of revenue recognition described below based on information currently available to the Company.
During the third quarter of 2023, Ernst & Young, Infinera’s independent registered public accounting firm (“EY”), informed the Company that the Public Company Accounting Oversight Board had commenced an inspection of EY’s integrated audit of the Company’s consolidated financial statements for the fiscal year ended December 31, 2022. Subsequently, late in the third quarter of 2023, EY raised questions regarding the Company’s stand-alone sales price (“SSP”) methodology as it relates to revenue allocation between product revenue, which is recognized upon delivery, and certain components of services revenue, which is amortized over a period of time, as well as the sufficiency of documentation retained by the Company relating to the Company’s quote to cash and inventory cycles. As a result of these queries, the Company reexamined its SSP methodology and engaged in a review of management’s review procedures related to the Company’s quote to cash and inventory cycles. In connection with the period-end close process, the Company’s management concluded that there were material weaknesses related to its (i) quote to cash cycle including the determination of SSP and (ii) inventory cycles, each of which remains unremediated. As a result, the Company has determined that its internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2022. The Company intends to amend its Form 10-K for the period ended December 31, 2022, to reflect management’s and EY’s assessment of internal control over financial reporting as of the period covered by such report, as well as the Forms 10-Q for the Company’s first and second quarters of 2023 to reflect management’s assessment of internal control over financial reporting covered by each period. The amendments will also describe the Company’s plans and efforts to strengthen its internal control over financial reporting and remediate its material weaknesses. The Company is continuing to review its SSP methodology with EY, including to determine the impact of any required reallocation of revenue between products and services between periods and the related impact on the Company’s previously reported financial results and the Company’s financial results for the third quarter of 2023. Based on its initial evaluation, the Company expects any adjustments to revenue will be shifts in allocation between deferred revenue and revenue recognized upfront, and expects that there will be no lost revenue, only shifts in timing of revenue recognition between accounting periods. Once the review process with EY is complete, the Company will report full financial results for the third quarter of 2023. More information on these matters is contained in the Company’s Current Report on Form 8-K and Notification of Late Filing filed with the SEC this afternoon.
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